While you were sleeping: Rate chatter rises

While you were sleeping: Rate chatter rises

Aug
21 (BusinessDesk) - Wall Street advanced, while US
Treasuries fell as investors await Federal Reserve Chair
Janet Yellen’s speech this Friday at the annual gathering
of the world’s top central bankers in Jackson Hole for her
take on the outlook for higher interest rates.

Minutes of
the latest Federal Open Market Committee meeting, held July
29-30, showed that US policy makers were optimistic about
the progress of the pace of recovery in the world’s
largest economy and that there was a possibility they might
have to lift the benchmark interest rate sooner than
expected.

“Participants generally agreed that labour
market conditions and inflation had moved closer to the
Committee's longer-run objectives in recent months, and most
anticipated that progress toward those goals would
continue,” according to the minutes.

“Moreover, many
participants noted that if convergence toward the
Committee's objectives occurred more quickly than expected,
it might become appropriate to begin removing monetary
policy accommodation sooner than they currently
anticipated,” the minutes showed.

In late afternoon
trading in New York, the Dow Jones Industrial Average added
0.43 percent, the Standard & Poor’s 500 Index gained 0.24
percent, while the Nasdaq Composite Index eked out an
advance of 0.01 percent. Earlier in the session the S&P 500
fell as low as 1,977.68 and rose as high as
1,987.68.

Gains in shares of Home Depot and Boeing, up 3
percent and 1.6 percent respectively, led the Dow higher.

US Treasuries fell. Yields on the five-year note rose six
basis points to 1.63 percent.

“The gist of this sounds
much more aggressive than what we expected,” Brian
Edmonds, the head of interest-rates trading in New York at
Cantor Fitzgerald, one of 22 primary dealers that trade with
the Fed, told Bloomberg News of the Fed minutes.

The US
dollar strengthened, rising 0.4 percent against the euro and
advancing 0.7 percent against the yen.

The minutes
heighten the anticipation for Yellen’s speech on Friday in
Jackson Hole, Wyoming.

Here, minutes from
the latest Bank of England meeting earlier this month showed
two of the nine monetary policy committee members wanted to
lift the Bank Rate, currently at 0.5 percent, by 25 basis
points, which is being seen as an unexpected challenge to
Governor Mark Carney.

“For two members, in particular,
economic circumstances were sufficient to justify an
immediate rise in Bank Rate,” according to minutes of the
Aug 6-7 meeting released on Wednesday. “These members
noted that the continuing rapid fall in unemployment
alongside survey evidence of tightening in the labour market
created a prospect that wage growth would pick
up.”

The Wellington-based BusinessDesk team led by former Bloomberg Asian top editor Jonathan Underhill and Qantas Award-winning journalist and commentator Pattrick Smellie provides a daily news feed for a serious business audience.

A total of seven new areas will be opened up to oil and gas exploration under its block offer tendering system, as the New Zealand government seeks to concentrate activity in a few strategically chosen areas. More>>

“The Prime Minister reassured New Zealanders that ‘post the passing of this law, will you all of a sudden find thousands of workers who are denied having a tea break? The answer is absolutely not’... Cotton On is proposing to remove tea and meal breaks for workers in its safety sensitive distribution centre. How long before other major chains try and follow suit?” More>>